Although India boasts of its diversified financial sector, certain finance giants have a relatively bigger influence on the future of the market. Infrastructure Leasing & Financial Services (IL&FS), proved this to be true, especially after the series of defaults it has faced in the past, and how it impacted the sector.
Considered to be India’s key infrastructure lender, IL&FS made it into the headlines in 2018 after news about its debt repayment defaults broke out. The crisis has undoubtedly put India in panic mode. After what happened, it’s not surprising that many are curious as to how the giant lender is doing to date.
Over a year after IL&FS collapsed, how exactly do you think the company has been performing lately? If you’re one among the curious ones, then here is a brief guide on everything you need to know about the giant lender – then and now. Read on.
Infrastructure Leasing & Financial Services – What are They?
Shortly called IL&FS, Infrastructure Leasing & Financial Services is one of India’s leading infrastructure development and finance companies. Specifically, the firm works as a non-banking financial company, meaning it performs banking like services but does not operate under similar regulation as traditional banks. It was first launched in 1987 to serve as the holding company of the IL&FS Group.
It is considered to be India’s key infrastructure lender, with at least 24 direct subsidiaries, over 130 indirect subsidiaries, six joint ventures, and four associate companies. It is known to provide all services necessary for completing infrastructure development projects, starting from visioning and documentation, to management and execution.
What Hit IL&FS?
Since IL&FS is considered a non-banking financial company, it isn’t eligible to accept deposits from the public. Instead, it can only borrow short-term corporate bonds from institutions to fund their activities and respond to their immediate financial needs.
In September 2018, IL&FS went under fire after some group companies defaulted on a series of payments. At the time, the group was said to have a debt of around Rs. 90,000 crores and couldn’t find resources to pay its debt.
The incident led to a panic in the market, as corporations in the shadow banking sector feared the possibility of liquidity crunch, a surge in volatility among financial stocks, and the comeback of Lehman Brothers-like condition.
In an effort to save what’s left, the Indian government announced in October about its plan to bail out the IL&FS and replace the existing board with new members.
IL&FS Today – How is it Performing Lately?
Over a year after what many dubbed to be the IL&FS crisis, the company is still in the process of addressing its huge debt.
In October of 2019, the government-appointed management committee of IL&FS has decided to address half of the debt through asset monetisation. At the time, the group said it is looking to monetise even its real estate assets, including the IL&FS headquarters in Bandra Kurla Complex, and is expecting to have about Rs 3,000 to Rs 3,500 crore from the sale.
Along with this, they also talked with lenders to float InVITs for assets that have received low or no bids.
In an interview, the group said they are expecting to address 47,000 crores, or at least half of the debt, by March 2020.
Now nearly two years since the crisis, reports about the possibility of “substantial recovery‘ against IL&FS debt are emerging.
In a report published by The Week last April, the news outlet said the Indian government is expecting “substantial recovery” against the group’s external debt, with the possibility of the recovered amount becoming “much more than the sum realised under the insolvency law so far.”
“We had hoped that the bulk of the resolution would be over by August ’20. But now due to COVID-19, that is likely to be delayed by a few months. The government has proposed a comprehensive resolution framework balancing stakeholders interests (banks, provident funds, pension funds and others),” said Corporate Affairs Secretary Injeti Srinivas, who commended IL&PS’ new board for doing a good job in trying to address the infrastructure lender’s debt worth of Rs 94,000 crore.
The Bottom Line
As of to date, although IL&PS hasn’t fully recovered from its over Rs 90,000 crores of debt, good management and continuous effort from its new board made it possible for the company to start seeing better days ahead.